First Class Tire Shredders, Inc. v. Employers Mutual Casualty Co.

OPINION AND ORDER GRANTING IN PART DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT, DENYING PLAINTIFF'S MOTION
FOR SUMMARY JUDGMENT, AND DISMISSING COMPLAINT

DAVID
M. LAWSON United States District Judge

The
parties have filed cross motions for summary judgment in this
insurance coverage dispute. They agree on many of the
essential facts. The plaintiff argues that the property
insurance policy (insuring “contractors'
equipment” against theft, among other things) issued to
it by the defendant covered a one-off, custom-built car
crusher that disappeared from a storage location, and the
defendant's refusal to pay the loss breaches the
insurance contract. The defendant argues that the
policy's “missing property” exclusion
absolves it from having to pay for the loss. The Court heard
oral argument on the motions on December 14, 2016. The
defendant has the better argument. The undisputed facts of
the case fit within the plain language of the “missing
property” exclusion, and the loss of the equipment,
therefore, is excluded from coverage under the insurance
policy. The defendant's motion for summary judgment will
be granted in part, the plaintiff's motion for summary
judgment will be denied, and the complaint will be dismissed.

I.

The
basic facts of the case are undisputed. Plaintiff First Class
Tire Shredders, Inc. operates a facility in Flint, Michigan.
The plaintiff's main business is collecting and shredding
used tires. The owner of First Class Tire Shredders, Harry
Powell, started the company more than 20 years ago. He also
previously owned several other businesses, including one
named First Class Homes, which operated from offices at the
same location as the tire shredding company.

In
2008, Powell constructed a mobile car crusher of his own
design that was built onto a 50-foot semi-truck trailer. The
crusher took about a year to build, and it originally was
built by Powell for use by First Class Homes. When it was
finished, the crusher measured approximately 50 feet long and
stood 17 feet tall.

Defendant
Employers Mutual Casualty Company (EMC) issued a business
insurance policy to First Class Tire Shredders, effective
from July 3, 2011 through July 3, 2012, which insured
against, among other things, “direct physical
loss” of “contractors' equipment, ”
including certain items listed on a schedule attached to the
policy. The crusher was listed on a schedule of covered items
as “Mobile Car Crusher, ” with a scheduled value
of $100, 000. The policy states that it covers
“scheduled equipment” that is subject to a
“direct physical loss caused by a covered peril,
” including “contractors' equipment, ”
unless the “property is excluded or subject to
limitations.” The policy also includes a “missing
property” exclusion, which states:

“We” do not pay for missing property where the
only proof of loss is unexplained or mysterious disappearance
of covered property, or shortage of property discovered on
taking inventory, or any other instance where there is no
physical evidence to show what happened to the covered
property.

At some
point, after Powell closed his First Class Homes business and
the crusher was not in regular use, it was moved from the
First Class commercial property to a storage yard at Junk
Iron & Metal, which is a salvage business operated by
Powell's friend, Donald Sampson. The crusher was stored
there for several years.

On June
1, 2012, Powell sent one of his employees, Rex Moore, to
retrieve the crusher from the Junk Iron facility. However,
when Moore arrived, he could not find the crusher in the area
where it had been kept (apparently in a space beside
Sampson's residence on the lot). Moore noted that a new
gravel parking lot had been constructed in the area where the
crusher was stored. He searched the salvage yard and two
adjacent storage facilities also operated by Sampson, but
could not find the crusher anywhere. Powell called Sampson
and asked where the crusher was, and Sampson said that as far
as he knew it was in the usual place where it had been kept.
Sampson could not explain how the crusher might have moved or
where it was. Sampson, it appears, was not deposed, but
Powell testified that Sampson said he was not around when the
crusher was moved.

On June
1, 2012, Powell submitted a claim to EMC for the missing
crusher, claiming a loss for the full scheduled value of
$100, 000. EMC responded and asked for certain documents
evidencing the ownership interest in the crusher, such as a
proof of title or registration for the trailer, any tax
returns disclosing ownership of the crusher as a business
asset, and any other invoices or documents related to its
acquisition or ownership. EMC also asked Powell to submit a
signed statement in proof of loss in support of his claim.
Powell then submitted a number of documents, which EMC
determined were not satisfactory to show that the First Class
Tire Shredders, Inc. entity owned or had spent any funds to
build or acquire the crusher, or that the insurable value of
the crusher, if any, was as much as Powell claimed. EMC also
asserts that Powell never has produced any “physical
evidence” to show what happened to the crusher, and
that the loss therefore is excluded under the “missing
property” provision. On March 22, 2013, EMC denied
Powell's claim for the loss of the crusher. This lawsuit
followed.

On
February 11, 2016, First Class filed a one-count complaint in
the Genesee County, Michigan circuit court alleging that EMC
breached the contract of insurance by refusing to pay for the
covered loss of the crusher. On March 15, 2016, EMC removed
the case to this Court. Discovery closed on August 31, 2016,
and the parties filed their cross motions for summary
judgment thereafter.

II.

Defendant
EMC contends that it is not liable for any breach of the
policy's terms, because coverage for any alleged loss of
the crusher is excluded by the “missing property”
provision of the policy, where the plaintiff has failed to
produce any “physical evidence” to show what
happened to the crusher. The defendant also argues that
coverage of the crusher was voided by a number of alleged
“misrepresentations” by Powell about the machine,
and that the policy ought to be cancelled outright. However,
the record does not establish EMC's entitlement to relief
on its second argument as a matter of law, because First
Class Tire Shredders has offered sufficient evidence to rebut
them. On the issue of the applicability of the “missing
property” provision, however, the only question is
whether the undisputed facts trigger that exclusion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fact that the parties have filed cross motions for summary
judgment does not automatically justify the conclusion that
there are no facts in dispute. Parks v. LaFace
Records,329 F.3d 437, 444 (6th Cir. 2003) (&ldquo;The
fact that the parties have filed cross-motions for summary
judgment does not mean, of course, that summary judgment for
one side or the other is necessarily appropriate.&rdquo;).
However, summary judgment is appropriate &ldquo;if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.&rdquo; Fed.R.Civ.P. 56(a). A trial is required only when
&ldquo;there are any genuine factual issues that properly can
be resolved only by a finder of fact because they may
reasonably be resolved in favor of either party.&rdquo;
Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 250
(1986). The parties have not seriously contested the basic
facts of the case on the application of the policy exclusion.
...

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